RD102 - Annual Report of the Virginia Small Business Financing Authority


Executive Summary:
Pursuant to Section 2.2-2312 of the Code of Virginia, the Executive Director of the Virginia Small Business Financing Authority (VSBFA) " ... shall within 120 days of the close of each fiscal year, submit an annual report of its activities for the preceding fiscal year to the Governor and the chairmen of the House Committee on Appropriations and the Senate Committee on Finance. Each report shall set forth, for the preceding fiscal year, a complete operating and financial statement for the Authority and any loan fund or loan guarantee fund the Authority administers or manages." The activity listed below and the attached financial statement with accompanying notes is in fulfillment of that requirement.

Fiscal year 2004 was a productive year for the VSBFA in helping Virginia's businesses bridge their financing gap to start up or expand. During 2004 the VSBFA committed $7.8 million through its eight direct loan and credit enhancement programs, and enabling an additional $52 million to be privately loaned and invested. These loans provided assistance to 147 small businesses or local Industrial/Economic Development Authorities and assisted in the creation of 1,571 jobs. Of the $7.8 million loaned, $5.6 million (72%) went to businesses in Southside and Southwest Virginia. The $5.6 million leveraged an additional $30.8 million in private investment and created 840 new jobs and retained an additional 35 in those two highly distressed areas of the Commonwealth.

Using the same Return on Investment model used by the Virginia Economic Development Partnership the direct and indirect jobs created through the businesses taking advantage of our financing assistance brought in $4.1 million in combined new income and sales tax revenues for the Commonwealth, a 63% return on investment in the first year and a 190% return on investment after 5 years. This calculation does not consider the fact that most of the dollars the VSBFA loans revolve back into the funds to be used again. Since inception, the VSBFA has assisted small businesses in creating and saving 23,081 jobs.

The loan programs of the VSBFA continue to face difficult budgetary challenges. None of the financing programs receive regular appropriations from the General Fund. The increased awareness and usage of the programs, coupled with budget cuts in previous years, have caused the funds to rapidly diminish. Given the tremendous leverage each program commands (direct loan programs leverage $19:1 and indirect loan programs leverage $30:1), the positive return on investment, and the impact on the most highly distressed areas of the Commonwealth; these programs should he continued and expanded.